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Mercer(MERC) - 2025 Q1 - Earnings Call Transcript
MERCMercer(MERC)2025-05-02 14:00
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Financial Data and Key Metrics Changes - The company's EBITDA for Q1 2025 was 47million,asignificantdecreasefrom47 million, a significant decrease from 99 million in Q4 2024, primarily due to 22 days of planned maintenance downtime at the Celgar mill, which adversely impacted EBITDA by approximately 30million[3][11]−TheconsolidatednetlossforQ12025was30 million [3][11] - The consolidated net loss for Q1 2025 was 22 million, or 0.33pershare,comparedtoanetincomeof0.33 per share, compared to a net income of 17 million, or 0.25pershareinQ42024[11]−CashconsumptioninQ1wasabout0.25 per share in Q4 2024 [11] - Cash consumption in Q1 was about 3 million, a decrease from 54millioninQ42024,withanetworkingcapitalincreaseofroughly54 million in Q4 2024, with a net working capital increase of roughly 23 million due to seasonal movements [11][12] Business Segment Data and Key Metrics Changes - The pulp segment contributed an EBITDA of 50millioninQ12025,whilethesolidwoodsegment′sEBITDAwasessentiallybreakeven[4]−Pulpsalesvolumesincreasedby26,000tonnesto478,000tonnesinQ1,attributedtothetimingofsalesdespitetheplanneddowntime[6]−Lumberproductionreachedanear−record128millionboardfeetinQ1,up1250 million in Q1 2025, while the solid wood segment's EBITDA was essentially breakeven [4] - Pulp sales volumes increased by 26,000 tonnes to 478,000 tonnes in Q1, attributed to the timing of sales despite the planned downtime [6] - Lumber production reached a near-record 128 million board feet in Q1, up 12% from Q4, with sales volumes also hitting a new record at 131 million board feet, up about 6% from Q4 [8][9] Market Data and Key Metrics Changes - MBSK prices in Europe averaged 15.50 per ton in Q1, an increase of 50fromQ4,whileNorthAmericanMBSKpricesaveraged50 from Q4, while North American MBSK prices averaged 17.53 per ton, up 66fromQ4[4][5]−InChina,theMBSKnetpricewas66 from Q4 [4][5] - In China, the MBSK net price was 793 per tonne, an increase of 26fromQ4,whilehardwoodsalesrealizationswereflatduetooffsettingpricechangesinNorthAmerica[5]−TheNorthAmericanMBHTaveragepricewas26 from Q4, while hardwood sales realizations were flat due to offsetting price changes in North America [5] - The North American MBHT average price was 12.68, down 30fromQ4,indicatingmixedpricingtrendsacrossdifferentmarkets[6]CompanyStrategyandDevelopmentDirection−Thecompanyistargetinga30 from Q4, indicating mixed pricing trends across different markets [6] Company Strategy and Development Direction - The company is targeting a 100 million improvement in operational efficiency and cost savings by the end of 2026 compared to 2024, alongside a 20millionreductionininventoriesandcapitalexpendituresin2025[17]−Thecompanyisfocusingonmaximizingmilloperatingratesandgeneratingcashtoreducedebt,withastrongemphasisonimprovingassetreliabilityacrossallbusinesses[24][25]−Themasstimberoperationsareexpectedtogrow,withthecompanyconfidentinitsabilitytocapturemarketgrowthduetoitssignificantproductioncapacityandbroadproductofferings[30][37]Management′sCommentsonOperatingEnvironmentandFutureOutlook−ManagementnotedthattheweakeningU.S.dollarcouldenhancepurchasingpowerforU.S.−sourcedfiber,whilealsoindicatingpotentialmodestfibercostinflationandlowerenergysalespricesinQ2[20][21]−Thecompanyanticipatesstabledemandforsoftwoodpulpinthemid−term,withupwardpricingpressureexpectedduetoreducedsupply[22][23]−Managementexpressedconcernsaboutglobaleconomicuncertaintyimpactingbuyingpatternsandpricing,particularlyinChina,butremainsoptimisticaboutthelong−termoutlookforsoftwoodpulp[20][23]OtherImportantInformation−Thecompanyplansformajormaintenanceshutdownsthroughouttheyear,withatotalof79daysofplanneddowntimecomparedto57in2024[34]−Aquarterlydividendof20 million reduction in inventories and capital expenditures in 2025 [17] - The company is focusing on maximizing mill operating rates and generating cash to reduce debt, with a strong emphasis on improving asset reliability across all businesses [24][25] - The mass timber operations are expected to grow, with the company confident in its ability to capture market growth due to its significant production capacity and broad product offerings [30][37] Management's Comments on Operating Environment and Future Outlook - Management noted that the weakening U.S. dollar could enhance purchasing power for U.S.-sourced fiber, while also indicating potential modest fiber cost inflation and lower energy sales prices in Q2 [20][21] - The company anticipates stable demand for softwood pulp in the mid-term, with upward pricing pressure expected due to reduced supply [22][23] - Management expressed concerns about global economic uncertainty impacting buying patterns and pricing, particularly in China, but remains optimistic about the long-term outlook for softwood pulp [20][23] Other Important Information - The company plans for major maintenance shutdowns throughout the year, with a total of 79 days of planned downtime compared to 57 in 2024 [34] - A quarterly dividend of 0.75 per share has been approved for shareholders of record on June 26, 2025 [12] - The company is committed to its 2030 carbon reduction targets and believes its products will play a significant role in addressing climate change [38][39] Q&A Session Summary Question: Can you elaborate on the secondary effects related to tariffs? - Management explained that secondary effects include the weakening U.S. dollar impacting costs and a slowdown in demand in China, which has put pressure on prices, particularly hardwood [44] Question: What is the outlook for pulp prices in Q2? - Management indicated that they expect more positive than negative impacts on pulp prices in Q2 compared to Q1, despite some recent softness in lumber prices [47] Question: Can you provide context on the 100millioncostsavingsobjectives?−Managementdetailedthatthecostreductionprogramtargetsvariousoperationalaspects,withexpectationstocapture100 million cost savings objectives? - Management detailed that the cost reduction program targets various operational aspects, with expectations to capture 40 to $50 million in savings by 2025 [52] Question: How would meaningful Section 232 tariffs impact lumber markets? - Management noted that Canadian lumber would become less competitive due to countervailing duties, which would favor their products from Germany [64] Question: Are there any changes in order patterns from pulp customers? - Management reported no significant changes in order patterns in Europe or North America, although there is some caution in China [106]